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Watching Congress take the final steps to pass Obamacare in March 2010 was a bitterly disappointing moment for the law’s opponents. They didn’t have to be told that what was being rammed through the House and Senate was the largest power grab by the federal government in at least a generation, with immense consequences for the nation’s economic vitality and political health. Opponents understandably redoubled their efforts to see the law repealed and replaced, and Republicans rode the popular revolt against the excesses of Obamacare all the way to a landslide midterm victory.

Unfortunately, the two best opportunities to stop the law in its tracks were missed. At the Supreme Court, Chief Justice John Roberts twisted himself into a pretzel to conclude that the law’s centerpiece, the individual mandate, was constitutional (but only as a “tax”), and President Obama beat back the campaign of former Massachusetts governor Mitt Romney, securing a second term. As a consequence, outright repeal is off the table for at least four years.

Disappointing as these events were, they do not remotely constitute the end of the fight to repeal and replace Obamacare. Indeed, this is a fight conservatives couldn’t walk away from even if they wanted to, because health policy is absolutely central to the struggle over the size and scope of governmental power. If Obamacare remains on the books, the federal government will become the dominant actor in nearly one-fifth of the American economy, tens of millions more Americans will become dependent on taxpayer support for their health care, the quality of American medicine will decline, and the spending commitments in the law will increase the pressure for ever-higher taxes​—​even as they add to the risk of national insolvency.

So the fight must go on. The only question, at this point, is how to proceed.

More by James C. Capretta

Already, 25 of the 50 states have declared, as is their prerogative under the 2,700-page law, that they will refuse to set up Obamacare health-insurance exchanges. Another 7 states have said that they will administer some regulatory aspects of the exchanges but will leave the bulk of the work of determining eligibility for the new subsidies to the federal government. Only 18 states plus the District of Columbia are planning to take on the full responsibility for the administration of Obamacare.

Steadfast resistance by so many states is a welcome and important development. In addition to the signal that such resistance sends, Congress hasn’t authorized funding for the federally run Obamacare exchanges that would operate in place of state-based ones. Moreover, the plain language of the hastily cobbled-together law​—​which the administration is ignoring for the moment​—​says that taxpayer-financed subsidies can only be funneled through state-based exchanges, and not through federal ones. (Legal challenges are proceeding on this front.)

In addition to opting out of establishing the exchanges, states can also refuse to implement Obamacare’s massive expansion of Medicaid. The Supreme Court opened up this option by striking down the law’s onerous penalties on states that decline to raise the income cutoff for Medicaid eligibility by 33 percent, as Obamacare prescribes. Current Medicaid beneficiaries are all-too-frequently badly served by the program, so GOP governors are on firm ground when they argue that no expansion should take place without fundamental reforms. And if no reforms are forthcoming, then Obamacare’s coverage expansions will fall well short of what was promised.

Beyond these encouraging developments in the states, however, there are two proposals that Republicans should embrace in the early months of 2013 to help destabilize Obamacare and lay the foundation for its eventual replacement. First, congressional Republicans should push for a delay in Obamacare’s implementation. Second, the party should unite behind, and persuasively advance, a credible and practical replacement plan​—​for one cannot replace Obamacare without offering a replacement.

Obama will never willingly sign anything that delays the implementation of his namesake, so delaying its onset would almost certainly require pushing him into accepting a delay as part of larger budget negotiations. According to estimates produced by one of us and former Congressional Budget Office director Douglas Holtz-Eakin, simply delaying the implementation of Obamacare by two years (until January 2016) would cut deficits by about $200 billion.